The technology used by Britain's intelligence agencies is "out of control", former Liberal Democrat leader Lord Ashdown has warned.
Lord Ashdown, a former special forces soldier and spy, called for an inquiry to address questions of privacy in the digital age.
He said surveillance should be targeted against individuals or groups, not against "the whole nation" as recent operations exposed by whistleblower Edward Snowden were.
In an interview with The Guardian, which has revealed details of the activities of British eavesdropping agency GCHQ based on documents disclosed by US intelligence whistleblower Mr Snowden, Lord Ashdown defended the right of the state to intercept communications.
Recalling seeing spies opening letters with the steam from boiling kettles in the 1960s, he said the state should intercept communications "only in cases where there is good evidence to believe the nation's security is being threatened, or arguably, when a really serious crime has been committed".
It needed to be "targeted on an individual and not classes of individuals or, as at the moment, the whole nation" and ought to be sanctioned by a third party, preferably by a judge or, if not, a member of the Cabinet.
He added: "We need a proper inquiry to decide what liberties and privacies ought to be accorded in the new interconnected world, and what powers of intrusion ought to be given to the state. The old laws that applied in the age of the steaming kettle will no longer do. The old protections are no longer good enough."
Lord Ashdown said the Guardian's reporting of Mr Snowden's leaked National Security Agency (NSA) files " had raised this important issue to the point where sensible people understand this inquiry is now necessary".
He added: "People today seem more casual about their privacy than they used to be. They don't seem to mind when their privacy is breached when they use Google, Facebook and other social media."
But the peer said he hoped this had not "changed the public's attitude towards the state's power to intrude into their privacy".
He said that he was "frightened by the erosion of our liberties" and attacked Labour's record on the issue in office, including the "disgraceful" Regulation of Investigatory Powers Act.
There was a "habit of politicians who are lazy about the preservation of our liberties or don't mind seeing them destroyed, to play an old game," he said.
"They tell frightened citizens, 'If you give me some of your liberties, I will make you safer'."
Lord Ashdown said the Intelligence and Security Committee (ISC), which provides parliamentary scrutiny of Britain's spies, was "past its time".
The body, chaired by Tory former foreign secretary Sir Malcolm Rifkind, was "wholly incapable of coping" with the new circumstances.
Former GCHQ director Sir David Omand told The Guardian he was in favour of an inquiry and thought it would be wrong to "dismiss the idea of a royal commission out of hand".
But he said the ISC had to be given the chance to complete its own inquiry into the work of the UK's intelligence agencies GCHQ, the Security Service (MI5) and Secret Intelligence Service (MI6).
He said: "Much now depends first upon the ISC and whether their latest inquiry can rise above the current clamour to a calm and dispassionate examination of the capabilities needed to keep our people safe and secure, and at the same time, how public confidence can be maintained that under no circumstances could these powerful capabilities be used in ways that parliament did not intend."